Canada is producing more oil than it can handle

Western Canada is producing 365,000 bpd more crude oil that current pipeline capacity can handle, a new report from the National Energy Board has revealed.

According to the authority, as of September, Western Canada produced a daily average of 4.30 million barrels of crude, while pipeline capacity stood at 3.95 million barrels per day.

Alberta, the largest oil producer in Canada, has turned to oil trains to offset the pipeline capacity shortage, and in November Premier Rachel Notley announced that the province will buy an additional 120,000 bpd in oil train capacity, to begin operating this year. It will reach full capacity in 2020.

Oil-by-rail shipments are already at a record high: in October, NEB said, these averaged 327,229 barrels per day, up by over 21 percent from the 269,829 barrels per day transported by rail in September. Although some familiar with the industry argue that shipping oil by rail is not as expensive as it may seem at first glance because the heavy Canadian crude does not need as much diluent as it would to be shipped via a pipeline, the current arrangement is not optimal according to the Albertan government.